The World Financial Network Credit Card Master Trust is preparing to tap the asset-backed securities market to raise proceeds , the first time that the program has come to market since September 2019.
Almost four years ago—before the onset of the COVID-19 pandemic, the war in Ukraine and the Federal Reserve's rate-hiking campaign to tame inflation—the program raised $684 million through its 2019-C deal, according to the Asset Securitization Report's deal database. Now the program is set to raise only half of that amount, $342.4 million, according to pre-sale reports from Fitch Ratings and S&P Global Ratings.
A pool of receivables from Comenity's Bank's revolving credit card accounts, generated through its merchant programs for major national retailers such as Victoria's Secret, Kay Jewelers, and Caesar's Entertainment, will secure World Financial's notes, according to S&P. Those brands account for the top percentages of total accounts—25%, 5.86%, and 2.11%, respectively.
RBC Capital Markets is lead underwriter on the deal, which will issue notes through about four classes of notes, although only two classes of notes will be rated. Comenity serves as the deal's sponsor, servicer and subservicer.
Also, Fitch notes, the pool is confronting issues that are similar to the rating agency's retail credit card indices. As of March 2023, the collateral pool's 12-month average gross chargeoffs were 7.36%, up from the 6.03% for the same time period one year earlier.
In March 2023 the monthly payment rate, on a lagging twelve-month average, declined 15.95%, down from 17.16% in the same period a year earlier, Fitch said.
The rating agency did note other troubling performance areas around World Financial Network's assets since H2 2022, the rating agency said. As of the March 2023 collection period, gross chargeoffs were 8.50%, up from 3.69% compared to the year before. Delinquencies in the 60-day plus range were 3.69% in March 2023, up from 2.71% in the period the year before, according to the rating agency.
In another potential credit drawback, gross yield remained below the pre-pandemic average of 34.67%, referencing January 2019 to February 2020.
Both Fitch and S&P say they intend to assign ratings of 'AAA' and 'AA' to the class A and M notes, respectively. All of the notes have a final maturity of March 15, 2030.
